Blog

Whether in order to condone delay, Balance Sheet is sufficient acknowledgment under Section 18 of the Limitation Act, 1963, was a question considered by the NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI, before a bench consisting of Hon’ble Justice Ashok Bhushan, Chairperson, and Dr. Alok Srivastava, Member (Technical), in the matter of G.S. Buildtech Pvt. Ltd. vs. Ardee Infrastructure Venture Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 388 of 2021], on 23.12.21.

The present appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the judgment and order dated 28.09.2020 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench, by which application filed by the appellant under Section 7 of the Insolvency and Bankruptcy Code, 2016, had been rejected. The appellant disbursed an amount of Rs.1,30,00,000/- to the Corporate Debtor. Certain repayments were made by the Corporate Debtor on 11.06.2015, 29.06.2015 and lastly on 15.03.2016. The appellant sent communication to the Corporate Debtor seeking confirmation of accounts between the parties, as well as subsequent legal notice issued for repayment, which were not answered by the Corporate Debtor. Accordingly, an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, was filed by the appellant on 20.03.2020 before the Adjudicating Authority claiming that the Corporate Debtor owed an amount of debt amounting to Rs. 39 Lacs. The application was rejected by the Adjudicating Authority on two grounds; firstly that the application was barred by time, and secondly, that the appellant does not come within the definition of “financial creditor”. The present appeal has been filed challenging the impugned judgement.

Learned Counsels for the Appellant, argued that the balance sheet for the Financial Year ending 31.03.2017, which was signed by the Corporate Debtor on 01.09.2017, contains an acknowledgment with regard to sum of Rs. 39 Lakh by the Corporate Debtor. Due to not taking into account the fact that the appellant was entitled for fresh period of limitation due to the above acknowledgment, the impugned judgement was erroneous. Hence, the application filed by the appellant was contended not barred by time. It was further submitted that the finding of the Adjudicating Authority that appellant is not a “financial creditor” was also incorrect. It was contended that the mere fact that there is no proof for payment of interest does not take away the debt owed by the Corporate Debtor as a financial debt.

The National Company Law Appellate Tribunal, Principal Bench, New Delhi, in light of the arguments and having perused the facts and evidence placed before it, placing reliance on precedents, held that it is now well settled that acknowledgment in the Balance Sheet is sufficient acknowledgment under Section 18 of the Limitation Act, 1963, and thus the impugned judgement was erroneous in that respect. Additionally, the tribunal saw it fit to examine the definition of “financial debt” as provided in Section 5(8). It was noted that the definition clearly contemplates that debt along with interest is not mandatory to be there it to be a financial debt. Interest will be a part of the debt only if there is interest in the transaction. Words ‘if any’ after the word interest clearly indicates that it is not mandatory that debt should be along with interest in all cases. Therefore, the tribunal found reason to question the previous judgement, holding that the appellant is not a “financial creditor”. Thus, by taking into consideration the Balance Sheet, the Adjudicating Authority was directed to re-consider the question of the applicant being a “financial creditor”. Thus, the tribunal set aside the order of the Adjudicating Authority and remitted the matter to the Adjudicating Authority for fresh consideration of the application under Section 7 after issuing fresh notice to the Corporate Debtor and after giving opportunity to the Corporate Debtor also.

Click here to read the judgement.

Judgement reviewed by Bhargavi